Example:
Invoice #1103 for ABC company has been billed and paid out of trust
Upon creating the invoice, the following QuickBooks Online accounts are affected:
Debit: Accounts Receivable 323.67 (increased)
Credit: Income acct 323.67 (increased)
(Note: If your firm uses cash-based reporting, your Profit and Loss will not reflect the invoice as revenue until it has been paid; Accrual-based reporting will show the invoice as revenue when the invoice is created. In either situation, the credit is to the income account, but will only be visible on the Profit and Loss in accordance with how you view your reports.)
In this example, sufficient funds are available in the trust account, allowing the "Pay from Trust" option to be used to pay the invoice. When the invoice is paid through the trust payment process in LeanLaw, the following entries are automatically generated in QuickBooks Online:
Debit: Funds Held in Trust: ABC company 323.67 (decreased)
(because it is a sub-account, it will auto-decrease the main liability)
Credit: Bank trust account 323.67 (decreased)
If your LeanLaw account is configured to allocate funds to "undeposited funds", the following process also occurs:
Debit: Undeposited Funds. 323.67 (increased)
Credit: Accounts Receivable 323.67 (decreased)
(A/R for that client is now zero)
When a deposit is made from undeposited funds, the following accounts are impacted:
Debit: Operating/Main bank account 323.67 (increased)
Credit: Undeposited funds: 323.67 (decreased)
(undeposited funds now cleared)
If you do not use Undeposited Funds then the payment will reflect as follows:
Debit: Operating Account 323.67 (increased)
Credit: Accounts Receivable 323.67 (decreased)
(A/R for that client is now zero)